BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 225
                                                                Page  1

        CONCURRENCE IN SENATE AMENDMENTS
        AB 225 (Chau and Nestande)
        As Amended  August 20, 2014
        2/3 vote.  Urgency
         
         ---------------------------------------------------------------------- 
        |ASSEMBLY: |     |(May 16, 2013)  |SENATE: |32-0 |(August 25, 2014)    |
         ---------------------------------------------------------------------- 
             (vote not relevant)

         ----------------------------------------------------------------------- 
        |COMMITTEE VOTE:  |6-1  |(August 27, 2014) |RECOMMENDATION:  |concur    |
        |(H. & C.D.)      |     |                  |                 |          |
         ----------------------------------------------------------------------- 

        Original Committee Reference:    TRANS.  

         SUMMARY  :  Gives the Department of Housing and Community Development  
        (HCD) greater flexibility in its administration of the Mobilehome  
        Park Resident Ownership Program, including allowing HCD to lend  
        these funds for individuals to repair their mobilehomes and for  
        nonprofit sponsors or local public entities to acquire mobilehome  
        parks.  

         The Senate amendments  delete the Assembly version of this bill, and  
        instead:

        1)Rename the Mobilehome Park Purchase Fund as the "Mobilehome Park  
          Rehabilitation and Purchase Fund" (fund).

        2)Rename the Mobilehome Park Resident Ownership Program as the  
          "Mobilehome Park Rehabilitation and Resident Ownership Program"  
          (MPROP). 

        3)Permit HCD to make loans from the fund to nonprofit housing  
          sponsors and local public entities to acquire a mobilehome park,  
          provided that no less than 30% of residents at the time of  
          acquisition are low-income.  Such loans must be to either:

           a)   Cure significant outstanding violations of state law  
             governing health and safety in mobilehome parks; or

           b)   Support a park acquisition that, in the determination of  
             HCD, will substantially benefit low- and moderate-income  
             homeowners, including maintaining affordable space rent  








                                                                AB 225
                                                                Page  2

             levels.

        1)Require HCD to make loans for the minimum amount necessary to  
          bring the park into compliance with all applicable health and  
          safety standards and maintain affordability, for a term of no  
          more than 40 years at 3% interest, and not to exceed 115% of the  
          value of the collateral securing the loan.

        2)Direct HCD to determine eligibility for and the amounts of these  
          loans by considering, among other things, all of the following:

           a)   Current health and safety conditions in the park and the  
             likelihood that they could be remedied without the loan;

           b)   The degree to which the loan will benefit low-income  
             homeowners; and

           c)   The age of the park and the age of the infrastructure that  
             will be rehabilitated.

        1)Require HCD, before making a loan, to verify the projected  
          operating budget of the park, funds for and costs of purchase and  
          rehabilitation, and that no park residents will be involuntarily  
          displaced as a result of the purchase or that the displacement  
          will be mitigated as required under state and local law.

        2)Permit HCD to make loans to resident organizations or qualified  
          nonprofit sponsors to assist low-income homeowners to make needed  
          repairs or accessibility-related upgrades under the following  
          circumstances:  

           a)   Applicants must otherwise have qualified for an MPROP loan;  
             and 

           b)   Applicants must demonstrate sufficient organizational  
             stability and capacity to manage a portfolio of loans to  
             individual homeowners.  

        1)Allow HCD to adopt guidelines to implement the repair and  
          accessibility-related upgrade loan program.

        2)Increase the loan term for loans to individual low-income  
          homeowners from 30 to 40 years.

        3)Increase the loan term for loans to resident organizations from  








                                                                AB 225
                                                                Page  3

          30 to 40 years, and from 100% to 115% of the value of the  
          collateral securing the loan.

        4)Include an urgency clause.
         
        FISCAL EFFECT  :  According to the Senate Appropriations Committee:

        1)Unknown increased expenditure of funds for new loans for  
          mobilehome repairs and upgrades, and as a result of potential  
          increased demand for park purchase loans due to more flexible  
          terms; and 

        2)Minor costs to HCD.
         
        COMMENTS:

         Background:  The residents of California's nearly 5,000 mobilehome  
        parks typically own their mobilehomes and rent the spaces in the  
        mobilehome park in which the homes are placed.  For various  
        reasons, mobilehome park residents in some parks have decided to  
        join together and buy the park or their individual spaces within  
        it.  This is referred to as a conversion to resident ownership.  

        Historically, when mobilehome parks have converted to resident  
        ownership, the residents have initiated the process and enlisted  
        the help of a nonprofit organization.  The nonprofit organization  
        typically buys the entire park and sells lots to individual owners.  
         

        MPROP was created in 1984 to provide low-interest loans to finance  
        the conversion of mobilehome parks to resident ownership and ensure  
        that low-income residents' housing costs remained at an affordable  
        level after conversion. The program is funded through a $5 fee that  
        certain mobilehome owners pay along with their annual registration  
        fee, as well as through loan repayment. There is currently about  
        $34 million in the MPROP fund. 

        New loan activity under MPROP has been slow in recent years, with  
        only a handful of loans made since 2007. The program had no  
        successful applications in 2010, 2012, or last year. HCD points to  
        the increasing cost and complexity of park conversions as two of  
        the primary reasons for the reduction in the number of successful  
        applications. 

        Purpose of this bill:  The author introduced this bill to  








                                                                AB 225
                                                                Page  4

        facilitate programmatic changes to MPROP that will make the  
        application and loan requirements more attractive to potential  
        borrowers.  The changes will ensure that HCD can use the  
        accumulated funds to preserve affordable homeownership  
        opportunities. The bill aims to achieve three key goals. 

        First, this bill aims to make MPROP work better for conversions to  
        resident ownership. This bill would make several changes to ensure  
        the most attractive loan terms for resident-initiated conversions.   
        These include increasing the maximum loan-to-value ratio to 115%  
        for loans made to resident organizations, and allowing for a longer  
        repayment period to better match MPROP loans with other potential  
        funding sources, such as loans from the Federal Housing  
        Administration.

        Second, this bill would ensure that MPROP can be used for the  
        acquisition and rehabilitation of mobilehome parks by nonprofit  
        developers who will own and operate the park.  Some parks in  
        California are suffering from years of neglect, leading to  
        substandard conditions within the park.  If not remedied, the park  
        could eventually close, displacing the homeowners.  With many  
        troubled parks, having a nonprofit owner take over ownership and  
        management while undertaking repairs can stabilize the park and  
        ensure that it remains an affordable source of housing.  This bill  
        streamlines MPROP rules governing acquisition by nonprofits by  
        separating in statute the MPROP funding rules for nonprofit  
        acquisitions from those governing conversions to resident  
        ownership, and provides attractive loan terms for nonprofit  
        acquisitions.  The proponents believe this will ensure that the  
        program better supports funding for nonprofit acquisition and  
        rehabilitation. 

        Third, this bill would allow a portion of the funds to be used by  
        homeowners for rehabilitation and accessibility improvements.  This  
        bill authorizes MPROP funds to be used to provide low-cost loans to  
        low-income homeowners in need of minor repairs or accessibility  
        upgrades for their homes, to be provided in connection with an  
        MPROP-funded acquisition or conversion by resident organizations or  
        qualified nonprofit sponsors. 
         
         This bill was substantially amended in the Senate and the  
        Assembly-approved version of this bill was deleted.  
         

        Analysis Prepared by  :                                Rebecca  








                                                                AB 225
                                                                Page  5

        Rabovsky / H. & C.D. / (916) 319-2085             


                                                                FN: 0005541